14/09/2011 Newsnight Scotland

there. It is terrible. Thank you. On Newsnight Scotland: Amid the

economic turmoil in Europe, Scotland appears to be bucking the

trend when it comes to unemployment figures. So does that mean Holyrood

has the right strategy and Westminster should follow suit? And

new papers reveal Tony Benn's ambitions to take control of all of

BP's North Sea assets when he was Energy Minister. Good evening. Are

there signs tonight that the UK Government may be relaxing its

austerity measures as the deputy Prime Minister talks of stimulating

growth by delivering infrastructure. With the private sector in Scotland

creating more jobs than are being lost, at the moment, the First

Minister has urged the coalition to take a look at the Scottish

approach and come up with a Plan MacB. So is the SNP strategy

sustainable? Here's David Allison. When it came in 1996, the end for

the Ravens Craig steelworks was quick enough, but the up and Down's

of industry and economics in Scotland are always there. In the

intervening years there has been development, but most of the area

around the former plant remains a barren, brownfield site. The great

depression of 1930 cast a long shadow and showed how something

happening far way ain -- on Wall Street could impact here. Today it

is the eurozone crisis, with Germans debating how much longer

they should bail out Greece. And a default by Greece a real

possibility. It is fact for the political future of Europe. It is a

fact for what Europe represents in the world. This is a fact for

European integration itself. Add to that, the legacy of the global

financial crisis from junk mortgages in the United States and

you have the backdrop to high streets here that tell their own

story. It is the second worst annual drop in sales in more than a

decade. Don't think anyone can deny the high street has problems, but

we go through cycles and this is one of the most severe we have seen

in 16 years. People have been more careful, they're eating in, not

buying big items. We could do with a stimulus in the house building

and that would stimulate the high street so people would buy floor

coverings and furniture and carpets. But at the moment we're not seeing

that. While sales are down in the high street, another survey, the

Bank of Scotland's purchasing managers' indx said manufacturing

production increased at its sharpst pace for four months. On

unemployment, the UK rate is 7.9%. In Scotland it is less, 7.5% and

north of the border the number out of work has fallen by 3,000 with

those in work rising by 23,000. Oufr the STUC said at least one in

six people in Scotland are still unable to secure a full-time job.

The headlines figures are not telling the full story of what is

happening. You dig under neath and look at the people described as

underemployed, that is working part-time who want to work full-

time. People identified as economically inactive, but wanting

a job. The picture is different and these trendss are not improving.

They're getting wor. Scotland is still outperforming the UK as a

whole, which saw economic growth stagnate in August. But the First

Minister wants the UK Government to reconsider its cuts programme.

concern, if you look at the ingredients of Scottish success,

its has been axe sell rating investment. We want to do that. But

we're facing a 40% decline from wom in capital investment. I'm urging

the Chancellor to look at the Scottish experience and see within

that experience some of the ingredients of how to get through

this recession. I'm urging not just a plan B, but a plan MacB.

Scottish want want more powers. And they're coming under scrutiny over

what they're doing with the powers they have to help Scotland through

these turbulent times. Putting thing back as they were is rare lay

realistic oopion and the combination -- rarely a realistic

option. Now with -- With me now in the studio is Professor Brian

Ashcroft, an economist with the Fraser of Allander Institute at

Strathclyde University. And in Edinburgh is the journalist George

Kerevan, who stood as an SNP candidate in May. When you look at

the employment and unemployment figures in Scotland and the retail

figures in Scotland, what does that tell you is going on? We need to

separate the labour market from the wider economy. If you look at the

figures, employment is growing in Scotland and unemployment is better

than in the rest of the United Kingdom. But going back to the

start of recession, there was a significant fall in employment in

Scotland, I fell off a cliff between 2009 and 2010. Probably

over shot, whereas it didn't do that and we lost about 4% of

employment in Scotland. So what is happening we have started to bounce

back more quickly. Of course this is not the rubbish it. It is good

to see. But the problem is output growth is weak. The Government, the

Scottish Government's own figures show broadly that Scotland is

lagging the rest of the UK. The service sector has hardly had any

recovering. Manufacturing has had some. We're almost thee and a half

years from the start of the recession and we have still hardly

recovered very much. Also if you look at the employment figures and

the labour reserves in the economy, we are still about 4% below the

pre-recession peak. So we are not talking about a buoyant economy.

But what about this point given the situation, everyone is in, the key

point that the private sector is creating job and mopping up job

being lost in the public sector in a way that is not happening in

England. It didn't happen to the same extent, that is true, the

private sector is creating jobs, that is good news. But we have to

accept that it is still a weak recovery. We still in the labour

market are four years in to the pre-recession peak and we are still

in employment term 2% below. So we're still weak and some of this

recovery is part of bounce back in the labour market, given the weak

growth inout put, our prediction this a unemployment will start to

rise again in Scotland. What do you read into the figures and what do

you think about the SNP's strategy in relation to that? I think Brian

is being his usual Jonah. Something interesting is happening here. In

Scotland for every one job lost in the public sector, two jobs are

being created in the private sector. Down south it is the other way

around andy two jobs lost in the public sector only one is being

created in the private sector. To explain what Brian was saying about

the Scottish market, Scottish firms laid off labour rapidly. That was

sad for the people concerned, but what happened was Scottish firms

were trying to get laner and fitter. So that what has happened is the

export economy picked up, they could put on jobs. In England they

didn't lay off labour to the same extent and put them on part-time

and what has been happening is they have been taking workers off part-

time and giving them longer hours, but not hiring new workers. That

has had an effect on confidence in England. If you look at Scotland,

confidence is stronger. That is the key lesson. Although not consumer

confidence. But we are back where we were in 2009. Accept that.

saw an improvement in productivity that has not fed through an

improvement in output. If in this picture we hear the First Minister

talking about a billion pounds coming out 069 capital spend,

because of the cuts and because there has been this accelerated

expenditure in Scotland, do you think the Government here's

advantage has gone? No, what Scotland is trapped in a UK economy

where capital spending has been slashed and confidence has gone and

things are slowing down. Plus you have the euro crisis whra. The

Scottish Government has been able to do is bring forward a lot of

capital spending, not enough, but it has kept the construction

industry better tan in England. John Swinney if you read his latest

economic plan, he is the past master at creating little projects

to improve productivity across the economy. Most people think it is

boring, but they're important, because the way you run economy is

not just to turn the steering wheel, but you make fine adjustments and

that maintains confidence and growth. But essentially that is

about improving the growth of the economy. And improving the growth

potential. That is important. But where we're at now is a situation

where there is deficient demand and we have significant unemployment

through deficient demands. This is not simply or only because Scotland

is part of United Kingdom, this is a worldwide problem. It is a

European-wide problem. The world economy is long wishing in large

parts in the western part of it, in a stagnation period that is will

last for many years and we have seen the developments in Europe are

such that we could see the mother of all banking crisis sweeping

across Europe in the next few weeks. That will have catastrophic

implication for our export marks, our bank ast the economy. I may be

a Jeremiah, but a lot of people share this view. We will look at

the potential impact if there is a Greek default. Do you have any

sense that you're getting any inclination from what Nick Clegg is

saying, he is talking about stimulating growth by

infrastructure, investments, do you think that there is any indication

that Westminster will be forced to relax the asterty measures? They

are moving in that direction. There is a de-- deficiency of demand. The

key is how do you get deup without sending the markets into hysterics?

We need targeted cuts in VAT and particularly in house repairs and

the housing market. That would be a key thing. With that you reduce

revenues. There noise historic problem in the markets. UK bond

yield are the low nest a generation. People are buying UK Government

debt. There is not problem here to expand through tax I cuts or

infrastructure. The problem with infrastructure problems, projects

is you need shovel ready projects that go Aled tomorrow, so they can

add de -- demand in the economy. If you want the pump in demand you

have to go down the route of tax cuts, payroll tax cuts, that thing.

But that reduces rev news. No, it allows the, the big problem is how

hold debt hangover. They are not spending. They the biggest item of

spend and we need to encourage them to spends and then that will bring

back tax revenues. So there is a multiplyer effect. If we look at

the growth and this strategy about how you get growth back into the

economy, there is a report by a economist at the Bank of America

saying that while austerity could help the longer outlook,

consolidation threatens the recovery in developed economies and

make the distinction between Greece that is already in a crisis and

saying if you want the investors to invest, ease off on the austerity.

Do you think that in some way Westminster is out of step with

international think something Certainly. Look at last week in

America, Barack Obama announced a major package of fiscal expansion.

And there are countries, not all of Europe is a disaster. Some of the

smaller countries are doing well, because they have maintained

demands and business investment and a lot of the arguments that the

Scottish Government has about devolving corporation tax is

Germaine to how we go forward. It is the norm in many country for

business taxes to be devolved to regional economys, because they're

different and I think that devolcano ving corporation tax

would have a bill big impact because it is a plan for cuts in

corporation tax would give business confidence to invest. That is key

in small businesses that is where Let's not... Let's be clear,

corporation tax is about improving growth potential. The problem of

the Scottish economy is not because capital is too high. We did hear

that Scotland has flowed around because the course of capital is

too high and that is what that tax cut tyres. It allows more

investment. There are issues, there is no silver bullet, not many non

national jurisdictions have it. It could work but it might not work.

We would lose revenue in the short term was to but not clear how long

it would be. We would have to forgo the block grant for a period of

time. This is a scary project which might work but there is no

guarantee and it is not a solution to stimulating demand in the short

run to get the economy back to its potential. Less than 30 questions -

- 30 seconds, do you think it is inevitable that Greece will do for?

I think it has been inevitable for 18 months and part of the problem

is that the European leadership is refusing to accept that which is

why the markets are taking it out of them. The big problem would be

his if we have an and controlled default, it will send dangerous

waves through the whole banking and credit system. -- and control. You

could teeter back to where we were in 2008, where the credit mechanism

goes into a temporary freeze. The issue of who controls North Sea

oil revenues raised its head at Prime Ministers Questions as David

Cameron dismissed as stupid a suggestion from the SNP's Angus

Macneil it should be devolved to Scotland. Mr MacNeil has asked for

an apology and the First Minister described the Prime Minister's

attitude as arrogant. Papers published today have shed light on

the same debate back in the 1970s, when the Labour government

considered taking over all of BP's North Sea assets. Professor Alex

Kemp has spent a decade trawling through government documents,

revealing new details about how it tried to prevent the nationalist

movement cashing in politically. Kevin Keane reports on some of his

It is this that makes the prospects... The year is 1975 and

Tony Benn is making his first visit offshore to see oil being taken

from the North Sea. It was a process that would bolster the UK's

economy for decades but while BP was glad handing the minister on

its new platform, he was making plans to strip them of all their

North Sea interests and hand them to the newly emerging National Oil

Corporation. Tony Benn wanted the corporation to have a very big role

indeed. The other person felt unhappy that for some time it was

more a paper company than a real company. He had quite radical ideas

including taking over all of BP's assets. That is the boss for --

bottle of North Sea off also today, Tony Benn stands by his initial

ambitions and was perfectly open about them with the industry.

Nevertheless, he was reined in by Harold Wilson, who thought the plan

was too radical and too expensive. If we had been able to do that, it

would have meant more money coming to us, greater control of the oil

because depletion was very important. We were anxious to see

the whales not depleted so rapidly that you were left with empathy

feels. -- the oil was not depleted so radically that we were left with

empty fields. They knew what I was doing and I told them openly what I

was doing. We negotiated as best we could. Much of the industry's

history is well-documented, both in books and in this maritime museum.

What Professor Kemp has been allowed is unlimited access to

official documents which reveal the thinking behind key policy

decisions of successive governments. It covers taxation, licensing, the

roles of the national oil and gas companies and privatisation. It

also gives an interesting insight In for 1974 elections, nationalism

was bleeding. The SNP riding high on a campaign that it was in fact

Scotland's oil. The official history reveals that the economic

benefits of oil were being actively downplayed by the Government, as a

deliberate move to suppress that nationalist movement. The UK

government did not want to encourage that it also in any

pronouncements, the size of the future benefits like the tax

revenues, were certainly not exaggerated. The history chance

Shetlands battle with the government over oil revenues. This

one being officially opened by the Queen. It had become a

strategically important site for an oil terminal. The Treasury wanted

any disruption payments to be paid directly to them. They even

threatened to cut of grants which the islands relied on. After a

fight, they eventually backed down. We held all the cards. The

technology of the Damant the oil pipelines had to come to the

nearest land form. -- technology of the day. The government eventually

gave in. There was a worry this could lead to other local

authorities... Saying that they should also give a share. The

Shetland council had to begin their deals -- heels and fight hard.

Aberdeen, Scotland and the UK have all undoubtedly grown because of

oil, although some civil servants thought that growth had not been